AOL Time Warner
AOL Time Warner is the merger of AOL and Warner Communications. History Beginnings In 2000, AOL stated its intentions to purchase Time Warner for $164 billion. Due to the larger market capitalization of AOL, their shareholders would own 55% of the new company while Time Warner shareholders owned only 45%, so in actual practice AOL had acquired Time Warner, even though Time Warner had far more assets and revenues. Time Warner had been looking for a way to embrace the digital revolution, while AOL wanted to convert its stock price into tangible assets. The deal, and officially filed on February 11, 2000, employed a merger structure in which each original company merged into a newly created entity. The Federal Trade Commission cleared the deal on December 14, 2000, and gave final approval on January 11, 2001; the company completed the merger later that day. The deal was approved on the same day by the Federal Communications Commission, and had already been cleared by the European Commission on October 11, 2000. 's logo used from 2001 to 2003.]] AOL Time Warner Inc., as the company was then called, was supposed to be a merger of equals with top executives from both sides. Gerald Levin, who had served as chairman and CEO of Time Warner, was CEO of the new company. Steve Case served as Executive Chairman of the board of directors, Robert W. Pittman (president and COO of AOL) and Dick Parsons (president of Time Warner) served as Co-Chief Operating Officers, and J. Michael Kelly (the CFO from AOL) became the Chief Financial Officer. According to AOL President and COO Bob Pittman, the slow-moving Time Warner would now take off at Internet speed, accelerated by AOL: "All you need to do is put a catalyst to Warner, and in a short period, you can alter the growth rate. The growth rate will be like an Internet company." The vision for Time Warner's future seemed clear and straightforward; by tapping into AOL, Time Warner would reach deep into the homes of tens of millions of new customers. AOL would use Time Warner's high-speed cable lines to deliver to its subscribers Time Warner's branded magazines, books, music, and movies. This would have created 130 million subscription relationships. AOL Division However, the growth and profitability of the AOL division stalled due to advertising and loss of market share to the growth of high speed broadband providers. The value of the America Online division dropped significantly, not unlike the market valuation of similar independent internet companies that drastically fell, and forced a goodwill write-off, causing AOL Time Warner to report a loss of $99 billion in 2002 — at the time, the largest loss ever reported by a company. The total value of AOL stock subsequently went from $226 billion to about $20 billion. An outburst by Vice Chairman Ted Turner at a board meeting prompted Steve Case to contact each of the directors and push for CEO Gerald Levin's ouster. Although Case's coup attempt was rebuffed by Parsons and several other directors, Levin became frustrated with being unable to "regain the rhythm" at the combined company and handed in his resignation in the fall of 2001, effective in May 2002. Although Co-COO Bob Pittman was the strongest supporter of Levin and largely seen as the heir-apparent, Dick Parsons was instead chosen as CEO. Time Warner CFO J. Michael Kelly was demoted to COO of the AOL division, and replaced as CFO by Wayne Pace. AOL Chairman and CEO Barry Schuler was removed from his position and placed in charge of a new "content creation division", being replaced on an interim basis by Pittman, who was already serving as the sole COO after Parsons' promotion. Many expected synergies between AOL and other Time Warner divisions never materialized, as most Time Warner divisions were considered independent fiefs that rarely cooperated prior to the merger. A new incentive program that granted options based on the performance of AOL Time Warner, replacing the cash bonuses for the results of their own division, caused resentment among Time Warner division heads who blamed the AOL division for failing to meet expectations and dragging down the combined company. AOL Time Warner COO Pittman, who expected to have the divisions working closely towards convergence instead found heavy resistance from many division executives, who also criticized Pittman for adhering to optimistic growth targets for AOL Time Warner that were never met. Some of the attacks on Pittman were reported to come from the print media in the Time, Inc. division under Don Logan. Furthermore, CEO Parsons' democratic style prevented Pittman from exercising authority over the "old-guard" division heads who resisted Pittman's synergy initiatives. Pittman resigned as AOL Time Warner COO after July 4, 2002, being reportedly burned out by the AOL special assignment and almost hospitalized, unhappy about the criticism from Time Warner executives, and seeing nowhere to move up in firm as Parsons was firmly entrenched as CEO. Pittman's departure was seen as a great victory to Time Warner executives who wanted to undo the merger. In a sign of AOL's diminishing importance to the media conglomerate, Pittman's responsibilities were divided between two Time Warner veterans; Jeffrey Bewkes who was CEO of Home Box Office, and Don Logan who had been CEO of Time. Logan became chairman of the newly created media and communications group, overseeing America Online, Time, Time Warner Cable, the AOL Time Warner Book Group and the Interactive Video unit, relegating AOL to being just another division in the conglomerate. Bewkes became chairman of the entertainment and networks group, comprising HBO, New Line Cinema, The WB, Turner Networks, Warner Bros. and Warner Music. Both Logan and Bewkes, who had initially opposed the merger, were chosen because they were considered the most successful operational executives in the conglomerate and they would report to AOL Time Warner CEO Richard Parsons. Logan, generally admired at Time Warner and reviled by AOL for being a corporate timeserver who stressed incremental steady growth and not much of a risk taker, moved to purge AOL of several "Pittman panzers". Endings AOL Time Warner Chairman Steve Case took on added prominence as the co-head of a new strategy committee of the board, making speeches to divisions on synergism and the promise of the Internet. However, under pressure from institutional investor vice president Gordon Crawford who lined up dissenters, Case stated in January 2003 that he would not stand for re-election as executive chairman in the upcoming annual meeting, making CEO Richard Parsons the chairman-elect. That year, the company dropped the "AOL" from its name, and spun off Time-Life's ownership under the legal name Direct Holdings Americas, Inc. Case resigned from the Time Warner board on October 31, 2005. Jeff Bewkes, who eventually became CEO of Time Warner in 2007, described the 2001 merger with AOL as 'the biggest mistake in corporate history'. After AOL Time Warner In 2005, Time Warner was among 53 entities that contributed the maximum of $250,000 to the second inauguration of President George W. Bush. On December 27, 2007, newly installed Time Warner CEO Jeffrey Bewkes discussed possible plans to spin off Time Warner Cable and sell off AOL and Time Inc. This would leave a smaller company made up of Turner Broadcasting, Warner Bros. and HBO. On February 28, 2008, co-chairmen and co-CEOs of New Line Cinema Bob Shaye and Michael Lynne resigned from the 40-year-old movie studio in response to Jeffrey Bewkes's demand for cost-cutting measures at the studio, which he intended to dissolve into Warner Bros. In 2009, Time Warner spun out its Time Warner Cable division, and later AOL, as independent companies. References Category:Time Warner Category:Multiverse